PROJECT SUMMARY/ABSTRACT Schizophrenia is among the most serious and most expensive mental disorders in terms of direct treatment costs, loss of productivity, and expenditures for public assistance, with an estimated annual cost to society of over $62 billion. Almost two thirds of these costs come from patients' diminished capacity for learning, working, self-care, interpersonal relationships, and maintaining general living skills. While skills training interventions have been developed to address skills deficits in this population, patients typically do not consistently practice the skills they learn in therapy; potentially limiting the mastery of these important skills and ultimately the efficacy of these interventions. We previously compared a skills-training program for middle-aged and older patients with schizophrenia and found that patients did not regularly comply with homework assignments, thereby limiting functional gains. We have developed a new skills-training intervention, called the Skills Training and Empowerment Program (STEP) that incorporates communication technology (i.e., cellular phones) to help maximize compliance with homework and to improve generalization of skills to real-world settings. The primary goal of this study is to examine the efficacy of our STEP program for improving functional outcome in a sample of middle-aged and older patients with schizophrenia. We will also examine whether this intervention is successful for increasing homework compliance, which we believe is a key mechanism linking skills training to increases in functional outcome. To accomplish our aims, we will enroll 240 middle-aged and older adults with schizophrenia and randomly assign them to receive 6-months of our new STEP intervention or 6-months of our original skills training intervention, known as the FAST program. Participants in the STEP program will attend 12 group-based intervention sessions (120 minutes each) emphasizing training in 6 functional domains (e.g., communication skills, financial management, medication management). Participants will also receive cellular phones and will receive 24 cell-phone sessions (20 minutes each) emphasizing homework compliance and problem-solving barriers to compliance. FAST participants will receive 24 group- based sessions (120 minutes each) emphasizing the same 6 functional domains. Both groups will receive 6 months of booster sessions to reinforce functional gains. Group differences in functional outcomes will be determined based upon assessments made at baseline, 6-, 12-, and 18-months post-baseline.